Two U.S. lawmakers have criticized cryptocurrency accounting guidelines outlined by the state securities regulator, arguing that they put cryptocurrency customers at greater risk of loss. The guidance comes from the SEC and went into effect last April.
The guidance requires financial firms that hold cryptocurrencies for clients to recognize as liabilities all digital assets they do not control. They also pointed out that digital assets should be backed by protection assets.
However, Sen. Cynthia Lummis (D-) and Rep. Patrick McHenry argued on March 2 that the guidelines “could” prevent regulated entities from engaging in digital asset custody, the opposite of what regulators should be doing.
In a letter to a personal ranking of the Federal Reserve System, the Office of the Comptroller of the Currency, the FDIC, and the National Credit Union Administration, lawmakers argued that while Staff Accounting Bulletin (SAB) 121 was intended to provide clarity in the accounting of digital assets Handling, it has a negative impact. The lawmakers argued that the effect of SAB 121 would be to "deny millions of Americans access to safe and secure custody arrangements for digital assets." The legislators also disagreed with “the breadth of the definition of ‘digital asset’ in SAB 121,” arguing that “it is necessary to develop a more granular hierarchy for this asset class, considering the opportunities and risks of digital assets with different functions.”
Lawmakers, including Lummis, have fussed over SEC accounting announcements in the past. Last year, five Republican senators, including Lummis, sent a letter to the SEC on June 16 expressing their concerns that the announcement amounted to "regulation masquerading as employee guidance" and did not comply with the Administrative Procedure Act.
On March 31, shortly after the announcement, SEC Commissioner Hester Pierce expressed similar concerns, noting that it was "the way the changes were made" rather than the accounting decisions themselves that she questioned. She describes the change as: “This is another manifestation of the SEC’s fragmented and inefficient approach to cryptocurrencies.”
